Owning real estate in North America can be an excellent way to preserve and grow wealth. But for international investors and high-net-worth individuals, the question is not only how to buy property—but how to hold it for maximum protection, reduced tax exposure, and ease of reporting. Asset protection is as much about structure as it is about location.
1. Use of Holding Companies
One of the most common and effective strategies is to own real estate through a corporation or limited liability company (LLC in the U.S., or a corporation in Canada).
- United States:
The Delaware, Wyoming, and Nevada LLCs are particularly popular. These states provide strong creditor protection, charging order remedies, and privacy for beneficial owners. An LLC can also provide pass-through taxation, which simplifies U.S. tax reporting for non-residents. - Canada:
A Canadian corporation can shield personal liability, but for foreign investors, a Canadian Unlimited Liability Company (ULC) is often used in cross-border tax planning with the U.S. A ULC may enable treaty benefits when structured correctly.
2. Trust Structures
For investors seeking both privacy and estate planning advantages, trusts are a powerful tool.
- In the U.S., foreign investors often use irrevocable trusts to hold real estate, keeping the property outside of their taxable estate while still controlling the investment through trustees.
- In Canada, alter ego trusts or family trusts are often employed to pass on real estate to heirs while minimizing probate and estate taxes.
Trusts also provide an additional layer of separation from creditors and can simplify succession planning.
3. Use of Limited Partnerships
In both the U.S. and Canada, limited partnerships (LPs) can be used to hold property. LPs separate the liability of limited partners while centralizing management with a general partner (often a corporation or LLC).
This structure is highly effective for family offices or syndicate investors pooling funds into multiple real estate holdings.
4. Tax Treaty Optimization
The U.S.-Canada Tax Treaty plays a major role in reducing withholding taxes on rental income and capital gains. When structured properly, investors can reduce double taxation and benefit from lower treaty-based rates.
Key considerations:
- Using a treaty-eligible entity such as a corporation incorporated in the investor’s home country.
- Filing the proper elections (e.g., §216 election in the U.S. for rental income to be taxed on a net basis).
- Ensuring the ownership chain qualifies for treaty benefits to avoid punitive withholding.
5. REITs and Co-Investment Platforms
For investors seeking minimal complexity, indirect ownership through Real Estate Investment Trusts (REITs) or specialized offshore co-investment platforms offers exposure to North American real estate without direct ownership risks. These vehicles often handle reporting and tax compliance at the entity level, simplifying investor obligations.
6. Estate and Succession Planning
In the U.S., non-resident aliens face estate tax exposure on U.S.-situs assets (including real property) with very low exemptions compared to U.S. citizens. Structuring ownership through offshore corporations, trusts, or blocker entities is essential to avoid estate tax shocks.
In Canada, capital gains tax applies upon death, making trusts and holding corporations vital tools to defer or reduce taxes on succession.
| Strategy | USA | Canada |
|---|---|---|
| Holding Companies | LLCs (Delaware, Wyoming, Nevada) offer privacy, liability protection, and pass-through taxation. Foreign investors may use U.S. LLCs owned by offshore companies for estate tax planning. | Corporations provide liability protection; Unlimited Liability Companies (ULCs) are often used for cross-border tax treaty benefits. |
| Trust Structures | Irrevocable trusts remove assets from estate tax exposure; grantor/foreign trusts provide succession planning and privacy. | Alter ego trusts and family trusts minimize probate, reduce estate tax on death, and allow controlled transfer to heirs. |
| Limited Partnerships (LPs) | LPs with LLC as general partner protect limited partners; useful for syndicate or family office real estate holdings. | LPs used for pooling investments with flow-through taxation; often paired with corporations for management. |
| Tax Treaty Optimization | The U.S.-Canada Treaty reduces withholding taxes on rental income and capital gains; elections (e.g., §216 election) allow net rental taxation. | The treaty ensures no double taxation and provides reduced withholding; ULC structures can enhance treaty access. |
| Estate/Succession Planning | U.S. estate tax applies to foreign-owned U.S. real estate with low exemption; offshore holding entities or trusts can mitigate this. | Canada imposes capital gains tax at death; trusts and corporate ownership structures help defer or reduce liability. |
| Indirect Ownership (REITs, Funds) | REITs provide exposure without direct ownership; entity handles reporting and tax compliance. | REITs and co-investment vehicles simplify compliance and reduce individual reporting burdens. |
Final Thoughts
The best strategy depends on the investor’s residency, treaty benefits, investment horizon, and estate goals. For many, the combination of an LLC (or Canadian ULC) owned by a trust delivers the trifecta of asset protection, tax efficiency, and reporting simplicity.
At Invest Offshore, we emphasize that while property values are important, the ownership structure is the true engine of long-term wealth preservation.
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